Internet

Why It Makes Sense for Businesses to Threaten Online Critics

Add another page to the fast-growing chronicle of shady ways for companies to try bullying customers who post unflattering reviews on the Internet.

This time the unlucky critic was Jen Palmer, who told a CBS affiliate in Salt Lake City that she received a bill for $3,500 from Kleargear.com, a company that sells office tchotchkes. Kleargear claimed the negative review Palmer had posted on RipoffReport.com was a violation of a nondisparagement clause in its terms of service, which happen to include a hefty fine. The company also threatened to move the issue to a collection agency if Palmer didn’t cough up, with corresponding damage to her credit.

Kleargear seems to have lost this one by overreaching. Its attempt to quash one very minor piece of bad publicity brought down a torrent of unflattering media coverage, and the company felt compelled to take the terms down from its website. This isn’t going to help it sell more desktop nap pillows. But the incident also shows how effective this kind of threat can be. It’s not hard to damage someone’s credit, but consumer advocates say it’s comically difficult to fix even egregious abuses of the credit system.

From the facts reported on the local news, Kleargear falls into the category of egregious abuse. The website Techdirt points out that the nondisparagement clause didn’t seem to exist when Palmer posted the review. Referring someone to a collection agency within 30 days of a debt is not exactly standard business practice either, according to Evan Hendricks of Privacy Times, a newsletter that follows the credit-reporting industry. (Numerous attempts by Bloomberg Businessweek to reach Kleargear were unsuccessful.)

Reporting something that you know to be untrue to a credit bureau violates federal law, as well as state laws in Massachusetts and California. But the primary recourse for those damaged by such reports is to go through the credit bureaus themselves, which are required by law to investigate. While the advent of the Consumer Financial Protection Bureau has forced credit bureaus to be more responsive, investigations are often perfunctory at best, says Ira Rheingold, the executive director of the National Association of Consumer Advocates.

If Palmer actually has agreed to these terms and this case becomes a debate over the validity of the terms of service themselves, the legal issue grows even cloudier. There are various fraud statutes that might apply, but consumers will have trouble even finding a lawyer to repair their credit. Few people even practice this kind of law. “It’s really messy,” says Hendricks, “but in the short term the consumer is really screwed.”

Kleargear isn’t the first company to experiment with these methods for muzzling critics. Medical Justice, a reputation service for doctors, drew fire for making patients sign contracts that transferred the copyright of their future reviews to their doctors, thereby giving the doctors a way to force independent websites to pull down the reviews. The organization eventually gave up on the practice. There have been reports of similar clauses popping up in the terms of service for rental properties.

Eric Goldman, a professor at Santa Clara University School of Law, says that such terms aren’t likely to stand legal scrutiny. There is increasing momentum to try to combat lawsuits that claim online reviews are defamatory, and more than half of U.S. states have passed so-called anti-SLAPP laws that combat defamation lawsuits filed to silence constitutionally protected speech.

Then again, the point of the intimidation is not to get that far. In the same way that patent trolls operate by threatening lawsuits, not by actually filing them, businesses can intimidate people into taking down unflattering reviews—or not writing them in the first place—by claiming some legal right they don’t have. It’s unclear how often this is going on. The rational response to a letter threatening to ruin your credit is to consent to the demands being made, not talk to a local television reporter. It seems inevitable that companies are going to keep testing the waters on this one.

“So where does that leave us?” says Goldman. “Two observations: One, when don’t-review-us clauses are opposed to public scrutiny, they don’t fare very well, and second, this is an idea that doesn’t die very easily. Vendors can’t resist.”